Local employers doubt tax break will add jobs

Thursday

Feb 25, 2010 at 2:00 AM

A bill that passed the U.S. Senate Wednesday aims to create up to 3 million jobs by giving up-front tax breaks to businesses that hire unemployed workers. But local business owners are lukewarm on whether it will encourage them to hire anyone.

Christian Livermore

A bill that passed the U.S. Senate Wednesday aims to create up to 3 million jobs by giving up-front tax breaks to businesses that hire unemployed workers. But local business owners are lukewarm on whether it will encourage them to hire anyone.

Under the main provision in the bill, co-sponsored by Sens. Chuck Schumer, D-N.Y., and Orrin Hatch, R-Utah, any private-sector business that hires a worker who has been unemployed for at least 60 days wouldn't have to pay the 6.2 percent Social Security payroll tax on that employee for 2010. The cost could be $15 billion, and Social Security would be made whole with budget cuts elsewhere by 2015.

"It's not a panacea, but what it should begin to do is hire people," Schumer said.

The House is expected to pass the bill. Schumer hopes it will be law by Easter.

The bill could help give businesses an incentive to hire, said Ann Davis, an economist at Marist College.

"The people who've been unemployed longest have the hardest time finding jobs, so it will help in that respect," she said.

But some local business owners said the tax break is not large enough to make them hire workers.

"There's other added expenses that come with (hiring a worker), like medical insurance and so forth," said Middletown optometrist Doron Feder. "It's not a good time in the economy right now to make that difference."

For Brakewell Steel Fabricators in Chester, the cost of health insurance is about $20,000 a month for its employees.

There is a sense among these business owners that larger, systemwide changes are needed, but they're not sure what they are. They just know that they need permanently lower taxes, lower health insurance costs, and something to create more equity among businesses, whatever the size.

Laura Ebert, an economist at Marist College, said systemic changes should start with health reform to lower costs for businesses, and should also include tax changes to punish companies outsourcing jobs overseas and make Social Security taxes and payouts more progressive.

"There's something wrong with our system when certain industries are just rolling in dollars and the majority of our businesses are struggling," Brakewell owner Dan Doyle said. "Something really profound is wrong at a core level. There's a real imbalance."